Investing.com -- Sanofi (NASDAQ: SNY )’s shares could see upside in 2025, but Goldman Sachs analysts have outlined what needs to happen for this to occur.

The brokerage initiated coverage on Sanofi with a “neutral” rating and a price target of €120, suggesting a potential 11% upside from current levels.

Although the pipeline has strengthened, more proof points are required to fully transform Sanofi into a leader in research and development.

For Sanofi to break out of its recent trading range, which has been largely between €80-100, continued strong execution is essential.

This includes progress on the R&D front and effective commercial execution. Goldman Sachs believes that while Sanofi’s pipeline shows promise, particularly with the expected Phase 3 readouts for itepekimab (COPD) and tolebrutinib (PPMS) in 2025, the market needs more evidence before fully embracing the company’s transformation story.

In fact, "for us to become more positive, we would need to see a string of pipeline successes (Phase 2 and Phase 3) to further de-risk the long-term outlook and fully transform Sanofi into an R&D story," said analysts at Goldman Sachs in a note.

A critical factor for future growth is the replacement of Dupixent’s profits, which will face patent expiration in 2031. Dupixent currently contributes 40% of Sanofi’s group sales by 2030, creating a significant risk to long-term earnings.

Goldman Sachs flags that "Dupixent making up 40% of group sales by 2030, this represents a key risk to the long-term earnings power."

The brokerage estimates that by 2031, the company will need €11-12 billion in sales from wholly owned products to offset Dupixent’s lost profitability.

This is a challenging task, and proof of successful pipeline candidates is essential. Phase 2 and Phase 3 trials, particularly for amlitelimab and tolebrutinib, are crucial in helping to "de-risk the Dupixent profit replacement story," according to the analysts.

Regarding the financial outlook, Sanofi is expected to report €46.8 billion in revenue for 2025, reflecting a 5.7% growth, with EBIT reaching €12.7 billion, up 12.1% from the previous year.

The company’s earnings per share are expected to rise by 15.5% to €8.20. Analysts also expect free cash flow to yield 6.4%, a considerable increase from 4.8% in 2024.

Additionally, Sanofi’s dividend yield is forecasted to decrease slightly to 3.7%, with a pay-out of approximately €4.77 billion for 2025.

While Sanofi’s pipeline has gained traction, the critical question remains how well it can replace Dupixent’s earnings once it begins to face competition.

Goldman Sachs points out that "a re-basing of consensus profit-share expectations and strong launch momentum could make us more positive," but they caution that pipeline delays or disappointing launches could weigh on the stock.